Huge jump in property repossession figures ‘raises fears’ for UK households

Mortgages are cheap but growing numbers of us still can’t afford them

Around 6,180 households had mortgage possessions claims made against them in the past three months (Getty)

There’s no doubt we’re in a golden era… at least when it comes to the cost of borrowing money for property.

Enjoying some of the lowest interest rates for generations, there are whole swathes of the home-owning population who have no sense of the chaos that could be unleashed on their household budgets should we reach even an average historical cost of borrowing.

Today, once they get past the hurdle of saving enough for a deposit, first-time buyers are currently spending an average of just 17p in every £1 they earn on their mortgage. For those remortgaging, its only 16p. It’s keeping the number of people in mortgage arrears at historical lows.

So why do the latest official figures show the percentage of properties being repossessed is soaring?

This week, the Ministry of Justice reported mortgage possessions claims (the first step in the legal process of taking ownership of a home after mortgage arrears reach a critical point) are up by a staggering 39 per cent in the three months to June this year compared with the same quarter last year.

Around 6,180 households had mortgage possessions claims made against them in the past three months.

That’s the fourth consecutive increase in the number of claims made after a three-year period of stability. And yet repossession is the last-resort action taken by lenders who have been pushed hard in recent years to provide more help to borrowers struggling to pay their bills.

Each subsequent part of the legal process to remove homeowners in debt also saw similar increases, including the number of homes successfully taken back by the bank.

Rossendale and Burnley in the northwest and Merthyr Tydfil in Wales saw the largest number of repossession claims against owner-occupiers per head of the population, while London is the undisputed centre of problems among landlords.

Yes, we’re starting from a low point so any changes are going to be significant in percentage terms. But concern over this important data is growing. The Money Charity has calculated that a property is now repossessed in the UK every 94 minutes.

“Financial stress in British households is rearing its ugly head in these figures. The number of repossessions may be small in relative terms but this is a keenly watched indicator of economic health for the country,” says Tim Waterlow, development director of lifetime mortgage provider Responsible Lending.

“Things aren’t nearly as bad as they were around the time of the financial crisis in 2009 when repossessions peaked, but such a large jump, topping the year-on-year rise seen in the final quarter of last year, raises fears serious financial strain among households is on an upward trajectory once again.”

And in these unprecedented times, the situation could quickly become problematic.

Commenting on data from other sources that show similar repossession trends this week, Jonathan Harris, director of mortgage broker Anderson Harris, warns: “While interest rates remain at low levels, there is plenty of economic uncertainty and there is always a chance they could rise.

“Repossession is devastating, and any borrowers struggling to repay their mortgage should keep their lender in the loop. Lenders are being flexible and showing forbearance but it is much easier and less stressful to come up with solutions early on than further down the line when options may be much more limited.”

Mark Pilling, managing director at Spicerhaart Corporate Sales, which deals with arrears and possessions on behalf of lenders, says: “Our experience shows that lenders continue to do all they can to help borrowers in difficulty with a range of solutions to assist them deal with the difficulties faced.

“There are some instances though where despite the assistance that a lender can provide, repossession becomes the most viable option and also the best customer outcome. Managing these cases as early as possible is in the best interest of all parties.

“It is therefore imperative that lenders identify those who are already having difficulties managing their mortgage, or are likely to in the future, as early as possible so that they can find a solution before repossession becomes the only option.

The good news is ultra-competitive mortgages that can offer a little much-needed certainty are there for the taking.

“Growing availability of competitively priced fixed-rate products in particular helps to avoid mortgage arrears, as borrowers can enjoy consistent monthly repayments with no unexpected rises during the fixed period,” says Shaun Church, director at Private Finance.

“To guarantee the favourable rates of today for years to come, borrowers that have no plans to move in the foreseeable future should consider future-proofing their mortgage and taking advantage of the long-term fixes the market are currently offering for a very minimal premium.

“The new 15-year fix from Virgin Money in particular offers borrowers a new level of security for a similar price of a 10-year fix, meaning those in their forever homes can achieve five years of extra security for little additional cost.”